Judge orders receivership for Saddleback Inn

SANTA ANA – An Orange County judge has appointed a receiver for the Saddleback Inn, with instructions to prepare plans for the old hotel's demolition or repair.

In October, Santa Ana sued to place the long-vacant Saddleback Inn property under a receiver who would see to it that repairs are made to fix what the city has for years contended are unsafe conditions.

Kevin Jones, attorney for Saddleback Inn LLC, which owns the inn, said his client hasn't yet determined its next steps.

"The client is considering its options," he said.

Named as defendants are Saddleback Inn LLC, which holds a leasehold interest in the property on which the old inn sits, and the Elks Building Association of Santa Ana, which owns the 2.4-acre parcel on which the hotel buildings sit. The parcel is adjacent to the Santa Ana Elks Lodge.

The city's lawsuit listed nearly two dozen problems that it considered dangerous, including water damage, rotting wood, rusting metal, damaged walls, broken windows, extensive fire damage and vagrants. It listed violation notices that date back to 1994. In January 2011, fire caused extensive damage to a building on the south side of the property, turning it into "a significant hazard," the suit said.

In his Jan. 25 ruling, Superior Court Judge John C. Gastelum acknowledged the seriousness of placing the inn in a receivership.

"Although the remedy sought is of a drastic nature, the court finds the city has demonstrated a receivership is the only option to have the conditions abated," Gastelum wrote. "With the exception of demolishing the burned structure almost two years after being significantly damaged by fire, respondents have not taken any measures of their own volition to remedy the conditions ..."

Saddleback Inn LLC had the southside building demolished in November at a cost of about $190,000, Jones said.

"The delay concerning the rehabilitation of the fire-damaged south building was caused by Lloyds failure to pay the fire claim," he said. "Accordingly, we have filed a lawsuit against Lloyds." That case is set for trial in June.

The receiver in the city's lawsuit will be Mark Adams, president of California Receivership Group LLC in Los Angeles.

The judge directed attorneys for the city to propose an order for the judge's review. It will detail violations that the receiver is empowered to correct.

The judge suggested the receiver prepare two plans, one for demolition of the remaining three structures, and one for their rehabilitation to compare expenses and "post rehabilitation/demolition property value." The plan for improvement should include an appraisal so that the property doesn't end up worth less than the money owed on it, the judge ruled.

An Orange County judge in April ordered Santa Ana to allow the owners of the Saddleback Inn the option to repair the property after the city ordered the once-popular inn demolished.

According to the suit, the owners of the Saddleback Inn admitted in a May letter to the city that they had not begun rehabilitation of the property or started work on a repair schedule mandated by the court.

After another inspection in September, the city issued a "repair or abate" order directing the owners to begin repairs within 10 days, with a 30-day deadline to complete them. Citing no significant progress, the city sued in Orange County Superior Court for appointment of a receiver on Oct. 30.

Jones last year said his client had been working with developers on a plan to turn the hotel into low-income senior housing, but that the city rejected the concept in a July 24 meeting.

The hotel, on the 1600 block of East First Street, opened in 1964, becoming a popular Orange County gathering place and eventually expanded to 231 rooms. By the 1980s, it began a downward slide as a result of competition from newer hotels. It eventually became a haven for long-term, low-income residents and hasn't operated as a hotel for at least five years.

The Saddleback Lodge property across the street is not part of the case, nor is a bridge over First Street connecting the two sites.

Saddleback Inn LLC is in a 55-year land lease that is due to expire in 2019. Saddleback Inn in 2004 acquired the buildings and signed the lease with the Elks, according to documents in the case.

The Elks, Jones said, have made no counter-proposals to Saddleback's offers to be bought out of the remaining term of the lease, to purchase the property or to extend the lease for 100 years.

"This has been the one constant for the last 10 years," he said, "the Elks refuse to engage in any dialogue regarding a viable path forward for the Saddleback Inn property."